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COVID-19: Loans, Grants and What You Need to Know!

| April 01, 2020
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COVID-19 has impacted the global economy by directly affecting production of goods & services, creating supply chain disruption and financial markets.

With the CARES Act passed, which included an unprecedented $2.2 trillion dollars in stimulus funding, includes:

(1)  Small business loans (up to $10 million) - $350 billion

(2) Small business grants of up to $10,000 - $10 billion

(3) Large business loans (greater than $10 million) - $500 billion 

(4) Hospital & health providers - $100 billion

(5) Payments to individuals:

      Single filers: Up to $75,000 in adjusted gross income will received $1,200.

      Married filers: Up to $150,000 in adjusted gross income will received $2,400. 

      Individuals are also eligible to receive an additional $500 per child.

SBA Loans under the CARES Act

With the CARES Act signed into law as of Friday March 27, 2020, it is important to know, as a business owner, how you can benefit from this. The following programs are available:

(1) Paycheck Protection Program (PPP) 

     PPP loans are 100% federally guaranteed loans (by the Small Business Administration) which is inteded for small businesses to maintain current payroll levels. These loans are intended to cover: payroll costs, rent, utilities and health care benefits. Did I mention that this program allows for partial loan forgiveness? The maximum available to each business is equal to the lesser of (a) $10 million or (b) 2.5 x average total monthly payroll costs. 

This program is not offered through the SBA directly. You need to speak to your financial lending institution, so long as they are identified as a SBA 7(a) lender. My understanding is that this program will be rolled out within the next few days. 

(2) Economic Disaster Injury Loan (EIDL)

      Another viable option for small businesses is the EIDL program which are longer term loans but still offer favorable lending terms.The misconception with these loans is that there are no loan forgiveness provisions. However, what is attractive about these loans is that under the CARES Act, applicants are permitted to request an advance up to $10,000 to pay allowable working capital needs. This is advance is essentially a grant, not required to be paid back, even if your applicaiton is denied. If you do receive a PPP loan, in conjunction with the $10,000 advance, the $10,000 from the EIDL will be deducted from the forgiveness amount in the PPP loan.

This program is offered through the SBA's website. Applicants can begin their application here 

Keep in mind as you go through these applications: This is not free money. These are loans with favorable provisions, designed to keep businesses afloat as we weather the storm that is this virus. As I have been assisting clients navigate these two loans and helping understand how this would impact them financially, it is important to consult your accountant or CPA before undertaking this yourself. Assessing your financial needs during this time should be your first step prior to applying. Once you assess what you need, then apply. Remember, there is only a limited amount of money and the applicants will be greater than the assistance available. Act fast and don't hesistate to contact us with any questions. 

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